Argentina calls on U.S. government to intervene in debt case

BUENOS AIRES Aug 11 Argentina on Monday called
on Washington to intervene in a court case over the country's
defaulted debt after a U.S. district judge threatened the South
American country with contempt for making what he called false
statements.

U.S. Judge Thomas Griesa, overseeing Argentina's
long-running battle with hedge funds over defaulted debt, said
on Friday he would issue a contempt of court order unless the
government stopped publicly claiming it had met its obligations
and was not in default.

Cabinet chief Jorge Capitanich countered on Monday that a
contempt order would violate Argentina's sovereign immunity and
he called on the Obama administration to rein in Griesa.

"When it comes to a bilateral relationship with a sovereign
country and the violation of its immunities, it is necessary for
the executive branch to intervene," Capitanich said. "The
executive has a monopoly on relations with other countries."

"The United States is responsible for the actions of its
branches of power, in this case the judicial branch, regardless
of the independence of the functioning of those branches," he
said.

In 2002 Argentina defaulted on about $100 billion in
sovereign bonds. It restructured most of that debt in a deal
that gave holders less than 30 cents on the dollar while a group
of hedge funds went to court for full repayment.

In 2012 Griesa ruled that Argentina could not repay holders
of restructured debt without also paying hedge funds their
court-award of $1.33 billion plus interest at the same time.

DISPUTED PAYMENT

Argentina says it met its obligation to the holders of
restructured bonds when it deposited $539 million into the
account of intermediary Bank of New York Mellon in June. Griesa
called the deposit illegal and ordered the money frozen.

As a result, Argentina effectively missed the coupon payment
after a grace period ended on July 30, pushing it into default
on its restructured debt. Griesa reiterated on Friday that
"there has been no payment."

Argentina has long accused the judge of overstepping his
bounds and being partial toward the funds, which bought
Argentine bonds at steep discounts and are characterized by
President Cristina Fernandez as "vultures" out to wreck her
country's finances in their pursuit of huge profits.

The U.S. Government filed an amicus curiae or
friend-of-the-court brief in 2012 that asked the 2nd Circuit
Court of Appeals to reverse Griesa's decision, arguing that his
ruling could undermine future sovereign restructuring
mechanisms.

However, Washington did not in writing favor Argentina, or
"condone or excuse a foreign state's failure to comply with the
judgment of a U.S. court imposing liability on the state." ( here
)

Argentina has published paid advertisements in newspapers in
Europe and the U.S. in recent weeks disparaging Judge Griesa and
court-appointed mediator Daniel Pollack, who succeeded in
getting the two sides to meet face-to-face for the first time in
nearly 13 years but could not get them to an agreement by July
30. Those negotiations are to continue.

But Argentina says it cannot make a deal with the holdouts
that is better than the terms offered in its two restructurings
based upon a clause in its agreement known as the Rights Upon
Future Offers (RUFO). The RUFO clause expires on Dec. 31, 2014.

In June the U.S. Supreme Court declined to hear Argentina's
appeal of the case, effectively exhausting Buenos Aires'
recourse in the U.S. legal system.
(Additional reporting by Walter Bianchi in Buenos Aires and
Daniel Bases in New York; editing by Clive McKeef)

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